Investors should brace themselves for a rise in uncertainty in the aftermath of the 11th-hour debt-ceiling compromise, according to Morgan Stanley."should bring a sigh of relief", it could inject more volatility into markets.
"The relative calm that pervades markets seems puzzling to us," he added, referring to stock, bond, and credit market"fear gauges" indicating much lower volatility levels than during March's regional banking crisis. If that passes through Congress, it'll prevent a potentially catastrophic default – with Treasury Secretary Janet Yellen warning last week that the government could otherwiseS&P 500Morgan Stanley isn't expecting that level of market chaos again – but Tirupattur flagged several looming issues that could rattle stock prices even after the potential crisis in Washington has been resolved.
That, in turn, could weigh on stock prices because, as borrowing becomes more expensive, government spending levels are likely to fall.
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